In re Dalezios

• Decision Date: 07 March 2014
• Docket Number: No. 10–18158–JNF.,10–18158–JNF.
• Citation: 507 B.R. 54
• Parties: In re Antonios DALEZIOS, Debtor.
• Court: U.S. Bankruptcy Court — District of Massachusetts

507 B.R. 54

In re Antonios DALEZIOS, Debtor.

No. 10–18158–JNF.

United States Bankruptcy Court,

D. Massachusetts.

Signed March 7, 2014.

Robert P. Feingold, Bradley, Moore, Primason, Cuffe & Weber, Lynn, MA, Dax B. Grantham, Grantham Cencarik, P.C., Beverly, MA, for Debtor.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matter before the Court is the Motion to Reopen filed by Antonios Dalezios (the “Debtor”) pursuant to which he seeks to reopen his case for the purposes of listing Elizabeth and Harrison Kelton (collectively,the “Keltons” or the “Creditors”) as creditors and obtaining a determination that any debt he owes them is dischargeable. The Creditors opposed the Motion. The Court heard the matter on January 28, 2014 and directed the parties to file supplemental memoranda.

The Debtor filed a supplemental memorandum. The Creditors, however, filed a “Conditional Assent to Motion to Reopen,” in which they stated that they had advised the Debtor that they had not sought, and were not going to seek, to except their claim from discharge. In addition, they indicated that they wished to obtain recovery from the Residential Contractor's Guaranty Fund (the “Fund”), established pursuant to Mass. Gen. Laws ch. 142A, § 5.

The material facts necessary to resolve the Motion to Reopen, except where noted below, are not in dispute, and neither the Debtor nor the Creditors requested an evidentiary hearing. The Court now makes the following findings of fact and rulings of law.

II. FACTS

The Debtor filed a voluntary Chapter 7 petition on July 29, 2010. He did not list the Keltons on his schedules of liabilities. The Court entered the discharge order on November 2, 2010. Approximately two months later, the Chapter 7 Trustee filed a Report of No Distribution. On February 24, 2011, the Debtor's case was closed.

On December 20, 2013, the Debtor filed his Motion to Reopen. He attached to his Motion a copy of a complaint filed by the Keltons, on or about June 25, 2013, in the Massachusetts Superior Court, Department of the Trial Court, a copy of a home improvement contract from “Antony's Services” for a remodeling job at the Keltons' residence in the sum of $33,000, and a copy of a Memorandum of Decision and Order, dated December 2, 2013, issued by the Superior Court. See Kelton v. Anthony's Handyman Servs., No. 13–2636, Slip op. (Dec. 2, 2013).¹

The Creditors objected to the Motion to Reopen referencing the Superior Court action, as well as a previously filed complaint against the Debtor in the Newton District Court in February of 2013, which they voluntarily dismissed. The Debtor maintained that the complaint was dismissed because the damages claimed by the Keltons exceeded the jurisdictional limits of district courts, seeMass. Gen. Laws ch. 218, § 19. The Creditors, however, maintained that they dismissed the action after learning of the Debtor's bankruptcy discharge and that they advised him to file a motion to reopen at that time. They stated:

It would be inequitable to allow the Debtor to reopen the case now when the Debtor was told to reopen or the Keltons would refile suit. The Debtor not only refused to do so, but after the complaint was filed, he filed a baseless motion to dismiss based on the bankruptcy discharge thereby forcing the Keltons unnecessarily to spend thousands of dollars.

Further arguing that the Debtor was aware of their claims when he filed bankruptcy in 2008 and raising the doctrine of laches due to the delay and expense occasioned by the Debtor's failure to move to reopen his bankruptcy case until after the Superior Court case was filed, the Creditorsadded: “[r]eopening is for the debtor who honestly forgot a creditor, not a tactical move when all else fails.”

The Superior Court in its decision addressed the Newton District Court complaint filed by the Keltons and the Debtor's failure to move to reopen his bankruptcy case in early 2013. The Superior Court stated:

Plaintiffs voluntarily withdrew the District Court complaint without prejudice while counsel investigated the issue of whether the bankruptcy discharge barred the claim. At the conclusion of that investigation, Plaintiffs notified Defendants that they intended to re-file in Superior Court unless Defendants asked the Bankruptcy Court to reopen the bankruptcy and discharge Plaintiffs' claim. Defendants did not respond, and Plaintiffs then filed this lawsuit.”

Kelton v. Anthony's Handyman Servs., No. 13–2636, Slip op. at 5 (Dec. 2, 2013).

In their Superior Court complaint, the Keltons set forth two counts, one under Mass. Gen. Laws ch. 142A, § 17, which sets forth 17 prohibited acts by contractors and subcontractors, and one for breach of contract. They sought damages in excess of $30,000. The Debtor moved to dismiss the complaint based upon his bankruptcy discharge. The Superior Court's Memorandum of Decision concerned the merits of the motion to dismiss. After setting forth the facts and the standard for dismissal under Mass. R. Civ. P. 12(b)(6), the Superior Court stated:

Defendants contend that Plaintiffs' claims are barred because of Dalezios's bankruptcy discharge in November 2010. Plaintiffs argue that their claims are not discharged because Dalezios did not inform the Bankruptcy Court of Plaintiffs' claim, and Plaintiffs did not have notice or actual knowledge of the bankruptcy proceedings. Generally, a debt is not discharged if the debtor did not list the creditor's claim, and the creditor was not notified of the opportunity to participate in the bankruptcy proceeding. Colonial Sur. Co. v. Weizman, 564 F.3d 526, 530 (1st Cir.2009).

In Colonial, the First Circuit held that unlisted debts are not discharged in Chapter 7 no asset bankruptcies. Id. at 531–532. In so doing, the First Circuit expressly rejected the “no harm, no foul” approach to no asset bankruptcies taken by certain other Circuit Courts of Appeal. Under that view, a creditor whose debt was not listed in a no asset bankruptcy suffers no prejudice, because that debt would have been discharged had it been properly listed. In disagreeing with this approach, the First Circuit expressly declined to follow, among other cases, the only case on which Defendants here rely, In re Madaj, 149 F.3d 467 (6th Cir.1998). Colonial, 564 F.3d at 532 n. 5. I adopt the position of the First Circuit, and therefore find that Plaintiffs' unlisted claims were not discharged in bankruptcy, and are not barred.

Slip op. at 3. The Superior Court then considered the nature of the Keltons' claims for breach of contract, including allegations of defective and shoddy work, concluding those claims sounded in tort, not contract, and were barred by the applicable statute of limitations. The court also determined that the Keltons' claims under Mass. Gen. Laws ch. 142A, § 17, and Mass. Gen. Laws ch. 93A, sounded in tort and were barred by the applicable statute of limitations. With respect to claims that the Debtor only completed half of the work, but received excess compensation, the Superior Court concluded that those were contract claims that were not barred by the applicable statute of limitations and would be allowed to proceed.

As noted, the Debtor raised his bankruptcy discharge as a defense in support of dismissal of the Keltons' complaint in the Superior Court. He was partially successful in having some of the Keltons' claims dismissed, but not on the ground he asserted. He now turns to this Court, seeking to reopen his case to obtain a determination that the contract claims advanced by the Keltons, which survived as a result of the Superior Court's application of Colonial Sur. Co. v. Weizman, 564 F.3d at 532, and its statute of limitations analysis, should be discharged by order of this Court upon reopening of his case. He asserts that the omission of the Creditors' claim was innocent and that there would be no prejudice to the Creditors, citing Colonial Sur. Co. v. Weizman, 564 F.3d at 532. The Debtor also argues that he did not wait an unreasonable amount of time to seek to reopen his bankruptcy case. Aware that the Keltons seek to obtain reimbursement from the Fund, the Debtor responded that a prerequisite to reimbursement is a judgment against the contractor for a violation of Mass. Gen. Laws ch. 142A. The Debtor stated: “[i]n this case, it is impossible for the Creditors to obtain a judgment against the Debtor for violating 142A [sic] due to the fact that the Superior Court already dismissed all tort claims, and specifically the c. 142A claims made by the creditors.” ² The Creditors, however, asserted in their Objection to the Motion to Reopen that the Debtor had “ample notice of their potential claim as he was terminated in a heated discussion with the Keltons about his work that they thought was defective, which was followed by an exchange of letters.” The Creditors did not attach any of the letters to their Objection.

III. DISCUSSION

Section 350(b) of the Bankruptcy Code provides that “[a] case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.” 11 U.S.C. § 350(b). “The decision to reopen should be made on a case-by-case basis based on the particular circumstances and equities of a case, and should be left to the sole discretion of bankruptcy court.” Diaz–Nieves v. Irizarry (In re Irizarry), No. 06:10–bk–188876–KSJ, 2012 WL 592886 at *1 (Bankr.M.D.Fla. Feb. 17, 2012) (footnote omitted). See also Mass. Dept. of Revenue v. Crocker (In re Crocker), 362 B.R. 49, 53 (1st Cir. BAP 2007) (citing In re McGuire, 299 B.R. 53, 55 (Bankr.D.R.I.2003)). The moving party bears the burden of demonstrating sufficient cause to reopen. As the First Circuit stated in Colonial Sur. Co. v. Weizman, It is true that an unnotified creditor is not entirely helpless even after the bankruptcy proceeding is long over: the discovery of overlooked assets and the opportunity to prove fraud can be grounds for...